Counterfeit Products

Note that recent research implies that for companies like Microsoft some level of piracy actually can serve the company. It can be seen as a kind of product trial, building commitment. As updated versions of products become available, purchases may actually follow. Particularly as countries such as China begin to enforce WTO statutes on piracy, customers conditioned on pirated goods may indeed be wiling and able to pay for the new versions. In another way atleast in the short run. Apple’s iPod strategy, which designs and prices products that take into consideration consumers’ complaints regarding current intellectual property regimes seems to be working well.

While counterfeit CDs, toys and similar products cost companies billions of dollars in lost revenue and have the potential of damaging the product’s brand image, the counterfeiting of pharmaceuticals can do serious physical harm. In Colombia, investigators found an illegal operation making more than 20,000 counterfeit tablets a day of the drug Dristan, a generic aspirin known as Dolex, and Ponstan 500 a popular painkiller made by Pfizer. The counterfeit pills contained boric acid, cement, floor wax, talcum powder, and yellow paint with high lead levels, all used to replicate the genuine medications appearance.

Counterfeit drugs range from copies that have the same efficacy as the original to those with few or no active ingredients to those made of harmful substances. A pharmaceutical manufacturers association estimates that 2 percent of the $237 billion worth of drugs of each year are counterfeit or about $6 billion worth. In some African and Latin American nations, as much as 60 percent are counterfeit. The World Health Organization thinks 8 percent of the bulk drugs imported into the United States are counterfeit, unapproved or substandard.

Another problem is collusion between the contract manufacturer and illegitimate sellers. In china, exact copies of New Balance shoes are fabricated by contract manufacturers who are or were New Balance suppliers. They flood the market with genuine shoes that are sold for as little as $ 20. Unilever discovered that one of its suppliers in Shanghai made excess cases of soap, which were sold directly to retailers. One of Procter & Gamble’s Chinese supplies sold empty P&G shampoo bottles to another company, which filled them with counterfeit shampoo. Counterfeiting and piracy of intellectual property constitute outright theft, but the possibility of legally losing the rights to intellectual property because of inadequate protection of property rights in a country’s legal structure is another matter.

Finally, it should be mentioned that some critics argue that MNCs have pushed the current intellectual property regime too far in favor of the firms particularly with the most recent WTO TRIPS Agreement to be discussed in more detail below. The critics suggest that so called tight rein the firms hold on the production of intellectual property has actually served to limit creativity and the associated benefits to the people the intellectual property (IP) laws are intended to serve. Such arguments pitch antitrust laws against IP laws. The argument goes on.

Inadequate Protection:

The failure to protect intellectual property rights adequately in the world marketplace can lead to the legal loss of rights in potentially profitable markets. Because patents, processes, trademark and copyrights are valuable in all countries, some companies have found their assets appropriated and profitably exploited in foreign countries without license or reimbursement. Further, they often learn that not only are other firms producing and selling their products or using their trademarks, but that the foreign companies are the rightful owners in the countries where they operate.

There have been many cases where companies have legally lost the rights to trademark and have had to buy back these rights or pay royalties for their use. The problems of inadequate protective measures taken by the owners of valuable assets stem from variety of causes. One of the more frequent errors is assuming that because the company has established rights in the United States, they will be protected around the world, of that rightful ownership can be established should the need arise. This is the case with McDonald’s in Japan, where enterprising Japanese registered its golden arches trademark. Only after a lengthy and costly legal action with a trip to the Japanese Supreme Court was McDonald’s able to regain the excusive right to use the trademark in Japan. After having to buy its trademark for an undisclosed amount, McDonald’s maintains a very active program to protect its trademarks.
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